Playboy outsources magazine's business operations

Things are so bad at Playboy (PLA), once one of the largest magazines in America by paid circulation, that the company is outsourcing a number of critical functions, including ad sales, to save money.

Several media outlets have reported that Playboy will enter into a five-year partnership with American Media Inc., which publishes Star and Men's Fitness, to handle some key functions of publishing the magazine. Most of the 30 Playboy staffers in those business areas will be fired. The men's magazine firm started by Hugh Hefner says that the move will help its flagship publication return to profitability by 2011.

But will it be profitable? Maybe not. Playboy's circulation keeps falling. The magazine will cut its advertising rate base, the number of copies it tells advertisers it will circulate, by 38% to 1.5 million in January. That will also bring down what Playboy can charge advertisers per page. Playboy's ad pages are falling as well, and there is no guarantee that lowering costs will bring in enough additional ads to offset falling revenue.

Playboy's real problem cannot be solved by outsourcing. The magazine is dead, killed by racier publications and hardcore pornography available online and on DVDs. Playboy may occasionally publish a good interview or piece of fiction, but the main reason men have bought the magazine over the years is to look at naked women. Now, there are better pictures elsewhere.